ASPEN GROUP — Interim / Quarterly Report 2012

Feb 23, 2012

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Aspen Group Limited ABN 50 004 160 927

Aspen Property Trust ARSN 104 807 767

Level 8, Septimus Roe Square 256 Adelaide Terrace, Perth Western Australia, 6000

Telephone: 08 9220 8400 Facsimile: 08 9220 8401

Email: homemail@aspengroup.com.au

MEDIA RELEASE

ASX ANNOUNCEMENT 24 February 2012

FY12 Half Year Results

Highlights

• Operating profit after tax of $18.6 million, increase of 13.5%

• Statutory profit after tax of $13.7 million, increase of 78%

• Cash flow from operations of $13.1 million, increase of 28%

• Funds management fee income $7.4 million, increase of 17.3%

• Retail equity inflows into Aspen Parks up 44%

• Operating EPS of 3.16 cents, increase of 8%

• Distributions per Security paid of 2.1 cents

• Net Tangible Asset per Security of 0.68 cents

• Interest Cover Ratio of 3.8 times

Group Overview

Aspen Group (ASX:APZ) today announced an operating profit after tax of $18.6m for the half year ended 31 December 2011, an increase of 13.5% on the prior corresponding period.

Aspen Group Managing Director Mr Gavin Hawkins said the first half results demonstrated the continued benefits of the Group’s strategic weighting of its property portfolio towards the resource led economy of Western Australia.

“Our strategic positioning of the investment portfolio, with 62% of our property assets in Western Australia, has provided a solid platform for growth. Across the wider Group, including investments in our funds management vehicles, we have a 54% weighting towards the buoyant Western Australian economy.

“Demonstration of the benefits of the portfolio weighting, is the 7.6% increase in the value of our property portfolio for the six months, largely attributable to the Western Australian assets.

“The funds management business provided a solid operating result with management fees increasing 17.3% on the corresponding period in FY11.

“The results also highlight the success of our investment into expanding our funds distribution capabilities, where growing support of our Aspen Parks Property Fund (APPF) has delivered inflows for the first half of $18.8m, an increase of 44% on the corresponding period last year. Pleasingly we

Aspen Group ASX Announcement 24/02/12

have seen this growth continue and in fact increase into 2012, with the first two months of inflows achieving circa 50% of the first six months’ inflows.

“We see the funds inflow into APPF and the continued strong operational performance as being the catalyst for the next stage of growth. Further acquisitions and significant investment into existing properties will propel APPF to a new level of scale and sophistication.”

In commenting on the residential land and development syndicates, Mr Hawkins said, “Trading conditions in these markets remain mixed in the face of both domestic and global uncertainty. Whilst this uncertainty impacts the residential business in the short term, we believe the residential portfolio can deliver long term value as the projects are well established and positioned.”

In line with the difficult market conditions for new major developments, and as part of the rigorous ongoing assessment of the funds management business, Aspen Group recognised an impairment in respect of its investment in Aspen Development Fund No 1. The impairment results in an after tax write-down of $12.4m and reflects the Board’s assessment of the potential financial impact of a put option that was granted to a shareholder in ADF No. 1 at the time of raising capital.

In a change from the previous accounting period, Aspen Group has consolidated into the financial statements the Aspen Diversified Property Fund (ADPF). This is in recognition of Aspen moving to a 53% holding in ADPF. As a result of the change, the Group’s gearing position has increased to 35% at 31 December 2011, up from 28% at 30 June 2011 and is now consistent with the Group’s look through gearing position. While this is at the upper end of the Group’s preferred gearing range, it is expected that realisation of ADPF assets, in line with the Fund’s strategy, will see this gearing level progressively reduce over the next 12 months.

On the results and the outlook for Aspen Group, Mr Hawkins said, “Our results announcement today is in line with expectations and we reaffirm our full year forecast earnings remains in line with the guidance provided at the beginning of the year, particularly as we expect increased residential lot settlements in the second half of the year.”

OPERATIONAL REVIEW

Property Portfolio

AUM **$M **	REVENUE 1H12 **$M **	OPERATING EBITDA 1H12 1H11 **$M$M **	OPERATING EBITDA 1H12 1H11 **$M$M **	FUNDS EMPLOYED **$M **	ROC~~*~~ 1H12 %**	ROC~~*~~ 1H11 %**
323	24.16	15.04	17.36	372.51	8.1	8.3

• Return on capital annualised

• Net property income up 4.8% on a like for like basis, excluding impact of tenant default at Heaton Street, Rocklea (1.7% including Rocklea)

• Investment Property revaluation gains of $16.7m or 7.6% across the portfolio

• ATO Building is now 71% complete (66% at December 2011) and on track for completion in October 2012

• Weighted average lease expiry (WALE) of 4.8 years on completion of the ATO Building (30 June 2011: 2.3 years)

• Weighted average occupancy of 93% at 31 December 2011 (30 June 2011: 93%)

Aspen Group’s strategy is to ensure its investment property portfolio continues to provide a sound income yield, with the benefit of future valuation growth underpinning the Group’s growth.

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The investment property portfolio performed strongly in the first half, with net revaluation gains of $16.7m. This included an uplift in value of the Septimus Roe building in the Perth CBD (up 10.3%) which is benefiting from the strong demand for space in Perth’s office sector where vacancy rates have fallen to around 3% at January 2012.

Further evidence of the influence of the strong Western Australian economy is demonstrated by the increase in the independent valuation of the Karratha Village workers’ accommodation, which recorded an uplift of $8m (18%) for the half year.

The net operating income for the first half was adversely affected by the tenant vacating the Rocklea, Qld industrial building in August 2011, reducing net property income by $0.57m. Notwithstanding this vacancy, net property income for the portfolio rose 1.7% on a like for like basis or 4.8% when excluding this property.

In December, Aspen Group sold the Alcoa Building in Booragoon, WA as part of its portfolio enhancement strategy allowing the Group to capitalise on the current strength of the Perth office market, with the proceeds earmarked for debt reduction. At a sale price of $28.25m, the transaction was concluded at a 64% premium to the Alcoa Building’s original acquisition price of $17.35m, demonstrating the Group’s ability to successfully acquire, manage and add value to major assets.

The construction of the portfolio’s major asset, the ATO Building in Adelaide, remains on track for completion in October 2012. With the building having reached its completion height of 17 levels, fit out works for the major tenant are well advanced.

The Group’s non-core assets, valued at $24.8m, remain earmarked for disposal with sale contracts agreed for $1.6m during the half in respect of the land site at Herne Hill, WA. Further rationalisation will occur in the second half of FY12 with the advancement of planning initiatives to facilitate the syndication of land identified for residential development.

FUNDS MANAGEMENT

Management fee revenue for the first half year was $7.4m, an increase of 17.3% on the previous corresponding period. The improvement in fee revenue principally arose through performance fees achieved for the management of APPF, and an increased level of development activity in Aspen Living and ADF No1.

Total income contribution (including financing and equity contributions) rose 14.9% on the first half of FY11 to $13.1m.

The performance of each business within the Group’s funds management division is outlined below:

Aspen Diversified Property Fund (ADPF)

AUM **$M **	REVENUE 1H12 **$M **	OPERATING EBITDA 1H12 1H11 **$M$M **	OPERATING EBITDA 1H12 1H11 **$M$M **	FUNDS Employed **$M **	ROC~~*~~ 1H12 %**	ROC~~*~~ 1H11 %**
122	1.00	0.60	1.78	22.42	5.4	10.8

The first six months of FY12 has seen ADPF perform in line with expectations, with a number of leasing initiatives executed, particularly at the Castle Hill retail complex and Lane Cove commercial centre.

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With the secondary market in which ADPF operates having remained relatively stable, the portfolio occupancy has improved to 96% at the end of December (91% at 30 June 2011) and a weighted average lease expiry of 5.5 years has been achieved, up from 4.8 years at 30 June 2011.

In the six months to December 2011, independent valuations of three of the properties (representing 37% of the portfolio by value) were undertaken which resulted in a 4.8% increase in the value of investment properties over the six month period.

As a result of the Group’s interest in ADPF, an earnings contribution of $1.0m was recorded in the six months to December 2011 (1H2011: $2.1m). The reduction in contribution arose from the consolidation of ADPF into the Group’s financial statements effective 31 October 2011.

ADPF is due to reach the end of its initial investment term of seven years on 30 June 2012. As such, a unitholder meeting is to be convened prior to June 2012 to consider resolutions relating to the windup of ADPF or alternatively to consider extending it’s investment term.

Aspen Parks Property Fund (APPF)

AUM **$M **	REVENUE 1H12 **$M **	OPERATING EBITDA 1H12 1H11 **$M$M **	OPERATING EBITDA 1H12 1H11 **$M$M **	FUNDS Employed **$M **	ROC~~*~~ 1H12 %**	ROC~~*~~ 1H11 %**
290	4.33	3.23	2.55	18.88	34.3	31.2

APPF’s strong performance has resulted in a contribution of $4.3m of income through Aspen’s equity investment and management fees for the first six months of FY12 (1H2011: $3.6m).

Equity investment into APPF continues to grow with $18.8m in new equity raised during the half, a 44% increase over the corresponding period in FY11. Lower deposit rates and increasing investor demand for high yielding investments provide a very positive outlook, providing confidence that this can translate into a record year for new equity raising for APPF. Operationally APPF continues to perform soundly, with the weighting of the portfolio towards northwest mining accommodation (32% overall) bringing significant benefits to investors, and compliments the solid performance of the tourism assets. The combination of improved operational cashflow and strong inflows from investors has resulted in gearing being reduced to 39% at December 2011 (44% at 30 June 2011). Given the sound capital position, the immediate focus for APPF is to grow the portfolio, with both new acquisitions and progressing existing development opportunities to be actively pursued in the second half.

Aspen Living

AUM **$M **	REVENUE 1H12 **$M **	OPERATING EBITDA 1H12 1H11 **$M$M **	OPERATING EBITDA 1H12 1H11 **$M$M **	FUNDS Employed **$M **	ROC~~*~~ 1H12 %**	ROC~~*~~ 1H11 %**
298	5.05	3.74	2.94	74.13	10.1	8.7

Against a backdrop of challenging market conditions for residential land sales, Aspen Living achieved a credible result for the six months to 31 December 2011. Total income contribution (including financing and equity contributions) was $5.05m, a 19% increase over the first half of FY11.

Aspen Living has active sales and development activity across each of its five residential projects in three states, with the strongest performing estates being St Leonards and The Enclave, both in the north east corridor of Perth.

Sales activity across Aspen Living for the six months to December delivered 104 new contracts, bringing the number of contracts on hand to the end of the six month period to 134. Including the settlements completed to 31 December, Aspen Living has 69% of its full year forecast settlements under contract.

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Settlement activity for the first half was down on the corresponding period (55 lots compared to 161 in 1H2011), with the weighting of settlements to the second half of the financial year. Notwithstanding the expected strong second half, forecast settlements for FY12 has fallen to 272 lots (previous forecast 354), however this remains substantially in line with FY11. The downward revision reflects inventory lag and clearance delays in receiving titles at several estates, notably The Enclave where the first stage of lots (60 lots) is now expected to settle in August 2012 (previously June 2012).

The interest rate environment and general economic uncertainty is continuing to have a negative influence on the residential land sales market. As a result, the sales activity for Aspen Living has varied significantly from month to month as confidence in the market fluctuates and sales activity remains sensitive to changes in interest rates.

Notwithstanding these influences, Aspen Living residential estates are well positioned moving forward. Titled stock is available across all estates and activity levels in the north east corridor of Perth in particular remain positive.

In order to ensure the ongoing development and availability of stock across the portfolio, particularly the regional assets, Aspen Group continues to provide financial support to certain syndicates via debt facilities. These are viewed as largely medium term commercial funding arrangements that provide a valuable role in the long term growth strategy of Aspen Living’s portfolio.

Aspen Development Fund No.1 Ltd (ADF No.1)

AUM **$M **	REVENUE 1H12 **$M **	OPERATING EBITDA 1H12 1H11 **$M$M **	OPERATING EBITDA 1H12 1H11 **$M$M **	FUNDS Employed **$M **	ROC~~*~~ 1H12 %**	ROC~~*~~ 1H11 %**
239	2.71	1.61	0.44	37.11	8.7	1.6

The principal activity for ADF No.1 has been the continuation of development works on the Australian Taxation Office (ATO) Building in its Adelaide City Central precinct, which has now progressed to 71% completion when measured on a percentage of completion basis. The building remains on schedule for delivery in October 2012 and to date there have been no significant additional costs or issues in the development.

The fee contribution by ADF No. 1 to December 2011 was $2.7m, principally arising from the ATO Building development works. This increased from $1.4m in the first six months of FY11.

Activity levels across ADF No. 1 outside of the ATO Building development works have been subdued in what remains a challenging environment for realisation of major commercial and residential projects, coupled with capital constraints that hamper new developments.

Notwithstanding these challenges, activity at Byford on the Scarp saw the completion of 46 lots which allowed 19 lots to settle in the first half for net proceeds of $3.8m, down on the corresponding period in FY11 (27 lots settled for $4.2m).

ADF No. 1 also realised 317sqm of medical suites at Norwest Private Hospital for $1.6m. The focus for ADF No. 1 for the remainder of FY12 is to complete the planning initiatives for an industrial transport node in Upper Swan and the commencement of the next stage of the Adelaide City Central development.

As part of the overall capital management of ADF No. 1, agreement has been reached with the principal financer for an extension of the senior debt facility to September 2013.

Capital Management

The Group is placing a heavy emphasis on its capital management strategy which includes the acceleration of the realisation of non-core assets and investments. This focus will include syndication and sale opportunities of non-core assets and also the realisation of the Group’s equity interest in its externally managed investment.

During the first half the Group settled it’s transaction with Telstra Super for joint ownership of the ATO Building in Adelaide. This arrangement provided an option of a five year investment term facility in

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addition to a debt funding package for the construction works. This transaction also allowed a more appropriate weighting of the investment portfolio to the Adelaide office market.

The Group will continue to explore options to further enhance the debt maturity profile across the Group and its Funds. Pleasingly only 8% of these facilities (measured as a percentage of overall lending) are due for refinancing in the coming 12 months.

Summary

The first half results represent a sound start to the year, highlighting the recurring income streams of the Group from both the property and funds management divisions, the benefits of an overweight position in the resource driven Western Australian economy, and an expanded distribution network.

The outlook for the remainder of FY12 is for a continuation of the current macro environment, where the property portfolio is well positioned and strong tenant demand should lead to further rental growth and enhanced portfolio metrics.

The funds management business remains well placed to deliver stronger returns in the second half and take advantage of more favourable market dynamics for property funds. Increasing equity inflows will underpin asset growth for APPF, while Aspen Living will provide a stronger contribution largely through a bias of residential lot settlements to 2H2012.

More broadly Aspen has in place a number of strategic growth imperatives including further expansion of distribution capabilities, delivery of new fund products, continued asset recycling and a more active capital management program. Supporting this is the objective of achieving further Board depth and diversity, and a very experienced and stable management team looking forward to capturing the opportunities that lie ahead.

With the expectation that economic conditions remain stable and interest rates remain unchanged, Aspen affirms its guidance for FY12 operating earnings before tax of $35.75m and an operating after tax EPS of 6.43 cents per security.

End

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For further information please contact:

Gavin Hawkins David Tasker Managing Director, Aspen Group Professional Public Relations Phone: (08) 9220 8400 Phone: (08) 9388 0944 Mobile: 0402 148 279 Mobile: 0433 112 936 Email: david.tasker@ppr.com.au

About Aspen Group

Aspen Group is an ASX listed property investment and funds management group, focused on acquiring quality property assets and creating and managing innovative property funds and syndicates.

Formed in 2001, Aspen has progressed rapidly and is now a member of the S&P/ASX 300 index with assets under management of $1.3 billion.

Aspen’s core strength lies within the Group’s broad expertise across property acquisition, development and management enabling the Group to provide leading edge property solutions.

Aspen directly owns and manages a well diversified portfolio of commercial property assets Australiawide. The portfolio is spread across the office, industrial and retail sectors and has grown through acquisitions and portfolio revaluations of existing properties driven by a strong property management focus.

Aspen also has developed an outstanding reputation for creating unique and successful fund management products and related services. These managed funds have provided investment opportunities across a broad spectrum of property sectors including holiday and accommodation parks, residential land subdivisions, CBD office developments, private hospital developments and retirement and accommodation villages.

Website www.aspengroup.com.au

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